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Level 5 Advanced Diploma in Procurement

and Supply

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AD2 - Managing risks in supply

chains

EXAM EXEMPLAR QUESTIONS

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AD2 Exam Exemplar Questions Mar2013

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CASE STUDY AND QUESTIONS

CASE STUDY - GOLIATH QUARRY PRODUCTS (GQP)

Introduction
Goliath Quarry Products (GQP) was formed in the late 1960s in the UK to supply quarry equipment that
required strong, robust machinery capable of crushing and screening 6000 tonnes of quarry rocks per day.

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As the market developed GQP became a leading global supplier. GQPs production facilities expanded from
one factory site tofour4 factory sites in the UK. The main focus for GQP became new product development
and ensuring that it maintained the quality and reliability synonymous with its brand.

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In the last decade new low-cost competitors have entered the market and are starting to reduce GQPs
market share. GQP needs to concentrate on costs if it is going to sustain its market share leadership. GQP
directors insist that it must maintain its brand image but achieve the same quality product at a lower cost.
This may involve the use of low-cost country sourcing. Areas of concern for low-cost country sourcing are
as follows:

Poor quality product

The passing of title

Initial prices increasing once a commitment to supply has been made

Orders not shipping on time and premium transport arrangements having to be made

Low-cost country suppliers subcontracting work and GQP not being aware that they have done this.
This may result in poor quality.
The supply base
Simon Jones is one of GQPs Supply Chain Managers and is responsible for the procurement of the
fabrications for his site. The fabrications supplier base for GQP is mainly local. Simon realises that if he is to
reduce costs he needs to expand his supply base, introduce competition and consider procurement from
lower cost countries. Simon needs to review the range of fabrications and find product lines that would be
suitable for low-cost country sourcing. Simon decides that the best way to do this is with the next planned
new product introduction in 6 months time. Simon drafts a sourcing plan outlined in Table 1.
Table 1

Identify a product line suitable of sourcing globally

Gather drawings, material and finish specification
Determine the volumes over a medium/long-term period
Analyse the supplier market locally and internationally
Review international sourcing options and select
Send tender enquiry
Visit potential suppliers
Receive tenders
Select potential suppliers
Prototype build
Airfreight prototype for approval
Gain Quality approval
If approved then Final Negotiation and contract award

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D
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F
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Estimate
duration
(weeks)

Description

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Task

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AD2 Exam Exemplar Questions Mar2013

Predecessor

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Sourcing from low cost countries

GQP has a set time-frame of 6 months for the launch of its new product and needs to ensure no risk of
failing to meet this deadline.

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The local fabrication suppliers to GQP are very financially dependent on GQP with GQP being 80% of most
of the local fabricators business. Simon believes that there may be collusion between the local suppliers
when pricing. It is time for change and Simon believes that low-cost country sourcing may remove some
of the complacency GQP feels they are experiencing with the local suppliers. Simon must ensure that any
change to low-cost country sourcing must be seamless.

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AD2 Exam Exemplar Questions Mar2013

QUESTIONS
Q1 Learning outcome: 1.0

For each of the Activities A to E suggest how the risks associated with international sourcing and the
selection of global suppliers in the future may be reduced.

(25 marks)

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Q2 Learning outcome: 2.0

(i)


(ii)

The revised overall planned duration of the project.

(3 marks)

An approximate start date if the project is to be complete by 01 September.

(4 marks)

Q3 Learning outcome: 3.0

Discuss the contract terms and clauses that GQP can use to manage the risks identified for low-cost
country sourcing.


(25 marks)

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(a) Based on the information in Table 1:


(i) Identify the critical path for the project.
(5 marks)


(ii) Determine the planned duration for the sourcing project.

(5 marks)


(b) Calculate the maximum time saving that could be made on Task H in order to reduce the overall
duration of the project (taking into account the fact that all other task durations will remain as
in Table 1).
Show your calculations.
(8 marks)


(c) If the maximum time saving on Task H is achieved (and Task D is reduced by 2 weeks as

suggested by GQP Managing Director) calculate:

Q4 Learning outcome: 4.0

(a) Identify key risks for GQPs future business to be included in a risk register for GQP to address
potential risks.

(13 marks)

(b) Discuss how Simon can ensure a successful introduction of a low-cost country supplier to GQP
through good supplier transition planning.

(12 marks)

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AD2 Exam Exemplar Questions Mar2013